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About Michael J. Miller

Miller, who was editor-in-chief of PC Magazine from 1991 to 2005, authors this blog for PC Magazine to share his thoughts on PC-related products. No investment advice is offered in this blog. All duties are disclaimed. Miller works separately for a private investment firm which may at any time invest in companies whose products are discussed in this blog, and no disclosure of securities transactions will be made.

Mobile Payment Faceoff at FortuneTech

The most contentious panel at Fortune
Brainstorm Tech this afternoon dealt with mobile payments, with the banks
pushing mobile payment systems facing off against Google and the founder of
Square facing off against phone-based NFC solutions.

Michael Abbott, CEO of ISIS,talked about how the ISIS mobile phone
platformhad just announced agreements
with all four big U.S. payment platforms--MasterCard, Visa, American Express,
and Discover--and he said that made the entire industry available.

Doug Bergeron, CEO of Verifone Systems, said he had a "presence" in roughly five million of the seven million places in the U.S. that take credit cards. He said when the other companies want to move to a world of mobile payments, they should work with Verifone to make sure the new systems coexist with the existing systems.

John Partridge, President of Visa, talked about how people have multiple payment systems and would use different payment types.

Keith Rabois, CEO of Square, said the company didn't think of itself as a mobile payments company, but as a general payments company. He said the first phase was letting any small business collect payments on an iPhone, and then they came up with a full payments system on an iPad and then with a consumer product that incorporates things similar to loyalty cards.

Partridge thinks the difficulty of upgrading the systems in the U.S. was overblown, as merchants routinely upgrade their systems every few years anyway.

The big debate on the panel was about using near-field communications (NFC) in mobile phones for payments. Rabois said consumers don't see any virtue in it. He said 12 percent of credit cards in the U.S. have it, but most don't use it. Instead, he said, consumers like pulling out the credit card and just paying for it.

Stephanie Tilenius, Google's vice president of commerce and payments, discussed how including NFC in the Nexus S phone was about much more than payments. She said that the phone becomes not only your mobile wallet, but also your mobile shopping platform, with Google combining Google Wallet and Google Offers. She noted that trials show that using NFC is faster than credit cards.

Abbott said there would be other technologies but, for now, NFC is the most effective solution. Rabois rebutted by saying there are difficulties in using the phone instead of a credit card.

A marketing executive from Starbucks, which was involved in a number of the trials, said the company was looking at all sorts of projects but, ultimately, it would be up to the consumers, who could use whichever payment scheme they wanted. He agreed that mobile phones could change the overall commerce experience.

Partridge and Tilenius both said they expected big changes in what will be done with payments, with Tilenius saying it was like "Amazon in 1999." Partridge mentioned that new technology takes a long time to be adopted, though. He noted there were 14,000 banks in the system and lots of merchants, but although the banks are very excited about it, he said they were worried about the technology and the regulatory environments.

Rabois said he'd rather bet on cloud-based solutions (like Square or Visa) versus chip-based solutions like NFC. But Abbott and Bergeron discussed how credit cards were using magnetic stripes, which were an "analog solution."

When asked by Fortune's Stephanie Mehta if only the big card makers (represented by ISIS) and companies the size of Google could compete in mobile payments, Google's Tilenius said she thought it was all up to the consumers.

Then responding to a question about privacy, Tilenius talked about the encryption features within NFC chips. Abbott said he thinks any solution had to offer better privacy than today's technologies. Partridge said that he expects there would be state and federal legislation coming around security and privacy, and Abbott agreed.

Rabois talked about how Square--like PayPal before it--was letting more people accept credit cards. But Bergeron compared Square to people giving sub-prime markets, saying it was overcharging for its service. Dismissing this claim, Rabois said most businesses actually pay more than the 2.75 percent Square was charging, and he came close to accusing the traditional vendors of fraud for talking about lower rates.

It was certainly an interesting, if contentious, discussion. In a poll of the audience, a plurality of 35 percent of the audience, expected that 25 to 50 percent of all transactions in the U.S. will be done via a mobile payments platform in five years.

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